Not that the sector’s contraction during the third quarter of 2020 came at a much lower rate than the Saudi GDP, at current prices in the same period, amounting to 10.4 percent, reflecting a promising future for the sector locally.
The highest quarterly growth rate for the Saudi services sector historically was recorded in the first quarter of 2015, which was 17.8 percent.
The services sector is expected to record rapid growth during the coming years, in light of the huge tourism and entertainment projects announced as part of the Kingdom's Vision 2030, including the Qiddiya project, the Red Sea project and the Neom project, as well as the development of Al-Ula, which will contribute billions of riyals to the GDP.
The services sector is one of the most labor-intensive sectors, and thus focusing on and developing it may contribute significantly to solving the unemployment problem among Saudi citizens.
The sector is also a basic pillar of economic development, in addition to the growth of the other two sectors that make up the domestic product, namely "industrial" and "agricultural".
Sector component activities
The GDP of the services sector includes five main activities: wholesale and retail trade, restaurants and hotels, transportation, storage, information and communication, financial services, insurance, real estate, business services, collective, social and personal services, and fifth, government services.
The activities constituting the services sector, in terms of the contribution to the sector’s GDP at current prices in the third quarter of 2020, are topped by the “government services” activity with a 38.9 percent contribution, with a value of about 140.6 billion riyals.
Government services are related to all government departments, units of central and local administration, defense, security and justice agencies, units concerned with planning economic development, planning social welfare, education, health, culture and social services, which are provided free of charge or at a nominal price, and social security agencies.
The second shareholder is "financial services, insurance, real estate and business services", 25.2 percent, and the value of 90.8 billion riyals.
The activity of "money services, insurance, real estate and business services" means two main items: the first includes housing ownership and the estimation of rent for residential buildings, whether they are paid (leased to others) or accounted for (occupied by their owners), and the second item represents money services and includes financial services and insurance activities. Insurance, reinsurance and pension financing activities, while business services include activities auxiliary to money services activities and insurance services.
As for the third contributor, it is the "wholesale and retail trade, restaurants and hotels" activity with a contribution of 20.1 percent and a value of 72.4 billion riyals.
The "wholesale and retail trade, restaurants and hotels" is divided into two parts. The first is wholesale and retail trade, and it refers to the trade of goods purchased for the purpose of selling them in the same condition, while hotels and restaurants include providing meals and accommodation.
The fourth contributor is the "transport, storage and communications" activity, with a contribution of 11.5 percent and a value of 41.5 billion riyals.
The activities of "transport, storage and communication" include land transport, water transport, air transport, pipelines, storage, telegraphic, post and telephone services, and include publishing activities, film production, television programs, sound recordings, radio and information services.
The activity of "collective, social and personal services" is the fifth component of the services sector, with a contribution of 4.4 percent and a value of 15.7 billion riyals.
It is noteworthy that “collective, social and personal services” means the home services provided to families between them, education activities, health activities, social work activities, welfare activities, sports, leisure, entertainment, culture and arts activities, shelter activities, libraries and museums activities, and games activities.
Economic Reports Unit